[This sample letter is for REFERENCE ONLY. IMC schools should also refer to EDBC No. 17/2008 on “Appointment of Auditors and Audit Engagement Letter” or its update.]
Sample Audit Engagement Letter (for REFERENCE ONLY)
Our Ref. :
Date :
The Incorporated Management Committee of
(name of IMC School) (“School”)
Dear Sirs,
|AUDIT ENGAGEMENT LETTER |
The purpose of this letter is to set out the basis on which we are to act as auditors of the IMC and the respective areas of responsibility of the Incorporated Management Committee (“IMC”) and of ourselves.
RESPONSIBILITIES OF INCORPORATED MANAGEMENT COMMITTEE AND AUDITORS
1.1 As IMC of the School, you are
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Any such report may not be provided to third parties except the EDB to meet the requirement stipulated in the Code of Aid and other circulars/guidelines issued by the EDB, without our prior written consent. Such consent will be granted only on the basis that such reports are not prepared with the interests of anyone other than the IMC in mind and that we accept no duty or responsibility to any other party as concerns the reports.
2.3 As part of our normal audit procedures, we may request you and your Managers and Management Staff to provide written confirmation of certain oral representations which we have received from you and your Managers and Management Staff during the course of the audit on matters having a material effect on the accounts.
2.4 In order to assist us with the examination of the accounts, we shall request sight of all documents or statements, including the annual budget, operating and financial review, chairman’s statement and the IMC’s report, which may be issued with the accounts. We are also entitled to attend all general meetings of the IMC and to receive notice of all such meetings.
2.5 The responsibility for safeguarding the assets of the IMC and for the prevention and detection of fraud, error and non-compliance with law or regulations rests with the IMC. However, we shall endeavor to plan our audit so that we have a reasonable expectation of detecting material misstatements in the accounts or books of accounts
What outside information not mentioned in the documents does this document bring to
Furthermore, when the internal control is fixed, the outside auditor can rely on the clients system and less audit testing can be conducted. When everything is improved, the management letter is given to the organization’s top management and not disclosed to the public, (Finkler, S. A., Ward, D. M., & Calabrese, T. D., 2013). Next, is the auditor’s report that entails the opinion letter usually written in three paragraphs and given to the board of trustees. Then, the opinion paragraph is added on to state the organizations financial statements are in accordance of the financial position and followed through with (GAAP). The clean opinion addresses the opinion of the auditor and the overall exercising of professionalism. Also, the complete opinion of the financial statements is to give a representation of the organization. All other opinions may be included and can be addressed by adverse opinions if (GAAP) was not in accordance. A qualified opinion can be added if a specific area wasn’t included in the financial statement when needed. Finally, the management reports are conducted by the management team and not the auditors. The management report is the annual report the topics included in the report are the internal control system and the responsibility of the audit committee.
How management identifies those transactions, events and conditions that may give rise to the need for accounting estimates to be recognized or disclosed in the financial statements. And the auditor shall make inquiries of management regarding changes in circumstances that may give risk or new or the need to revise existing, accounting
The auditor must review disclosures for adequacy, and if the auditor concludes that information disclosures are not reasonably adequate, the auditor must state so in the auditor’s
14. In which paragraph of the standard audit report does the auditor communicate to the user that certain combining fund information in the financial statements is not part of the basic financial statements, but that such information has been subjected to auditing procedures and, in his or her opinion, is fairly presented in all material respects in relation to the basic financial statements?
The effective use of IA departments causes less dependency and or reliance on external auditing. Ineffective use of this department can create reliability of the external audit firm, high costs for use of their services. Ideally, effective auditing should be done twice a year, consist of a short period of attendance; whereas, if it is possible for charities to have an internal auditing department, auditing will be carried out as often as every three months and the likelihood of any mismanagement of funds will be greatly reduced and this lead to gradual abolition. For effective IFC practices, various functions should be implemented to address each area so that effective operations are in place and at the same time reduce
Section 404 of the act requires that the auditor attest to and issue a report on management’s assessment of internal control over financial reporting. To express an opinion on internal controls, the auditor obtains an understanding of and performs tests of controls related to all significant account balances, classes of transactions, and disclosures and related assertions in the financial statements (Arens, 2010).
Responses to inquiries of predecessor auditor were complimentary about Oceanview. Predecessor auditor spoke highly of Oceanview’s employees’ integrity, competence, and dedication to running a successful business. (Para 26, PES 3(Amended), pg. 12)
Auditors have the responsibilities as well as management to report internal controls. The auditors must examine closely management’s claim of effectiveness and also physically test the controls. After the examination, the auditors should express their opinion and any recommendations to fix any internal control weaknesses.
During the performance of this integrated audit, require numerous judgments about the internal control and overall financial reporting and how well it addresses risks of material misstatements within the financial statements (AICPA, 2014). After re-evaluating the previous errors found from the previous audit, the audit team found the corrective actions to be appropriate and justified in elimination of human error by implementing additional checks and balances within the manual process. No additional misstatements have been found and all internal controls off the financial reporting seem appropriate and just.
The auditor must obtain an understanding of the entity and its environment, including internal controls, so that they can identify and assess the risks of material misstatement on financial statements due to fraud or error and design and perform further audit procedures.
Also they must review any information in regards to amounts and disclosures in the accounting statements. (Intel Annual Report 2010, 105)
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